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To: put2rich who wrote (10535)	7/15/1998 9:45:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Venture capitalists seeking Internet investments Reuters Story - July 15, 1998 19:35 %BUS %US %WWW %ENT YHOO AMZN XCIT V%REUTER P%RTR By Andrea Orr PALO ALTO, Calif., July 15 (Reuters) - As average investors buy stock in big-name Internet companies like Yahoo! Inc. and Amazon.com Inc. , well-heeled corporate backers are pouring money into what they hope will be the online success stories of tomorrow. Venture capital investments in Internet companies totaled $460 million in the first quarter of 1998, according to a new "Money Tree" survey by PricewaterhouseCoopers. The survey, which tracks investments in start-ups and young companies, offers an indication of the pace at which the online industry is evolving and new business concepts are being born. The total amount invested in this year's first quarter was up 54 percent from last year's first quarter, when venture capitalists put $298 million into Internet businesses. Although it was somewhat below the all-time high of $567 million reached in last year's second quarter, it was an indication of the strong interest in a variety of businesses that have grown out of the popularity of the World Wide Web. In the latest quarter, for example, the survey found venture capital firms completed 101 Internet deals, compared with just four during the first quarter of 1995. "We're still extremely early on in the whole development of the Internet," said Michael Moritz, a partner at the Menlo Park, Calif., venture capital firm Sequoia Capital, one of the original investors in the popular Internet directory Yahoo. "I don't think we have yet seen even 10 percent of all the interesting new ideas related to the emergence of the Internet. We are not even at the end of Chapter One," Moritz said. The online industry has become the biggest recipient of money from venture capitalists, who provide funding to young companies in exchange for a stake in the business. While some of the money is being put toward companies modeled after existing businesses like online bookseller Amazon.com, venture capitalists say they are also eyeing new business models that have the potential to dramatically alter the Internet from its current form. This suggests not only that they believe there are more promising concepts on the horizon, but that they are unsure whether today's successful businesses will be the same ones that generate strong returns in the future. "I'm sure among today's highfliers are some of next year's victims," said Moritz. As popular as Amazon.com is at the moment, for instance, some venture capitalists are already investing in companies that make electronic books printed on compact computer screens instead of paper. Others believe the biggest Internet directories, or "portals" like Yahoo and Excite Inc. , could lose some of their appeal as the industry matures. "A year or two ago, very few people would have predicted the value of the portals. The question is will that value be transferred some place else?" said Thomas Peterson, general partner with El Dorado Ventures, also in Menlo Park. Peterson said he thinks advertising rates currently charged by the Internet portals could come down over time. "They're very valuable companies now, but their revenue streams will be under greater scrutiny as the whole Web develops," he said. Other venture capitalists said they are investing mainly in companies serving the business-to-business sector of the Internet market, as opposed to the consumer companies so popular today. "This is a huge area, and in general is much more attractive to the venture community," said Peterson. Most of the best-known Internet businesses are those like Yahoo that provide consumers a gateway to the Web. What is less apparent to the average investor is the change going on behind the scenes as companies upgrade their technology to adapt to the Internet. The business-to-business sector of the online industry involves upgrading corporate computing systems so that they can integrate various divisions and deliver more data to desktop computers that was previously accessible only through large back-office mainframes. "You'd be surprised at how many companies have Web sites where people enter information but don't have links to other parts of their business. People have to re-key it in," explained Peterson. "Now, everybody is rapidly changing infrastructure to automate the entire supply chain."